Leonard H. Dougal
Jackson Walker L.L.P.
ldougal@jw.com • (512) 236-2000
Shale Gas and Hydraulic
Fracturing:
Cutting Through the Hysteria
on
Water
Issues
Texas Water Laws and Regulations
HalfMoon Seminars
May 25, 2011
San Antonio, Texas
EPA’s Range Resources Emergency
Order
• “The consumer and well owner removed Domestic Well 1 from
service…due to rising gas content within the drinking water and
concerns with water quality, indoor air quality, and potential
explosivity.”
• “The contaminants identified…may present an imminent and
substantial endangerment to the health of persons because
methane in the levels found by EPA are potentially explosive or
flammable, and benzene if ingested or inhaled could cause cancer,
anemia, neurological impairment and other adverse health impacts.”
• “EPA has determined that appropriate state and local authorities
have not taken sufficient action to address the endangerment…and
do not intend to take such action at this time….EPA has determined
that this action is necessary to protect the health of persons.”
Source: In the Matter of Range Resources Corporation and Range Production Company,
Environmental Protection Agency, Emergency Administrative Order, SDWA-06-2001-1208.
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Media’s Take on Fracing
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Presentation Outline
•
•
•
•
•
Unconventional Shale Gas in Texas
Regulatory Overview
Water Needs, Supply Options, and Challenges
Potential Risks to Groundwater and Surface Water
Range Resources Case
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What is “Fracing”?
• “Fracing” or “Fracking” is short for Hydraulic Fracturing.
• Fracing was first used in the United States in 1947;
“shooting” wells date back to 1860s.
• Fracing is basically pumping fluids at high pressures into
producing formations to create fissures to allow more
natural gas to escape.
• Typically fracing takes place in horizontal wells, which
extend hundreds or a few thousand feet horizontally at
thousands of feet of depth.
• Fracturing fluids are composed typically of:
– 90% water
– 9.5% sand
– 0.5% other chemicals
Source: Freeing Up Energy, Hydraulic Fracturing: Unlocking America’s Natural Gas Resources,
API, July 19, 2010. (API, Freeing Up Energy).
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Fracing Lifecycle
Source: Draft Plan to Study the Potential Impacts of Hydraulic Fracturing on Drinking Water
Resources, EPA/600/D-11/001, February 2011 (EPA Frac Study Plan)
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U.S. Shale Plays
Source: U.S. Energy Information Administration (EIA),
http://www.eia.doe.gov/energy_in_brief/about_shale_gas.cfm.
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Texas Shale Plays
Source: EIA, http://www.eia.doe.gov/energy_in_brief/about_shale_gas.cfm.
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Three Primary Texas Shale
Plays
• Barnett
– Ft. Worth area
• Haynesville
– Far East Texas – Extends into Louisiana
• Eagle Ford (Gas and Oil)
– South of San Antonio
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Shale Natural Gas Reserves and
Production
•
U.S. Proven Reserves & Production:
– Reserves
• 2007: 23,304 (Billion Cubic Feet)
• 2008: 34,428
• 2009: 60,644
– Production
• 2007: 1,293 (Billion Cubic Feet)
• 2008: 2,116
• 2009: 3,110
•
Texas Proven Reserves & Production:
– Reserves
• 2007: 17,256
• 2008: 22,667
• 2009: 28,167
– Production
• 2007: 988
• 2008: 1,503
• 2009: 1,789
Sources: EIA, http://www.eia.doe.gov/dnav/ng/ng_prod_shalegas_s1_a.htm and EIA,
http://www.eia.doe.gov/dnav/ng/ng_enr_shalegas_dcu_NUS_a.htm.
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Shale Natural Gas Reserves
Source: EIA, http://www.eia.doe.gov/oil_gas/natural_gas/data_publications/crude_oil_natural_gas_reserves/cr.html.
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Horizontal Fracing Becomes the Norm:
Barnett Shale Example
Source: Current and Projected Water Use in the Texas Mining and Oil and Gas Industry, Draft
Report, Texas Water Development Board, February 2011. (TWDB Frac Study).
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Shale Natural Gas Production
Source: America’s Natural Gas Alliance (ANGA),
http://www.anga.us/learn-the-facts/abundance/market-stability.
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Haynesville Producing Greater
Than Barnett
Source: EIA, http://www.eia.doe.gov/todayinenergy/detail.cfm?id=570.
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Federal Regulation
•
Fracing, except for fracing with diesel fuel, was excluded from
Safe Drinking Water Act definition of “underground injection” by
the Energy Policy Act of 2005. (42 U.S.C. 300h(d)(1)(B)(ii)).
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–
•
April 12, 2011: EPA Deputy Administrator Bob Perciasepe testified
before Congress that using diesel in fracing requires an SDWA
permit or is a violation.
–
•
Bills introduced March 15, 2011 to remove exemption (HR 1084).
Similar bills introduced in Senate (S 587) and in past (2009 – HR
2766).
Some members of industry have previously stated that diesel is used,
but also report being unable to obtain diesel fracing permits from EPA
in past despite efforts.
April 26, 2011: EPA Administrator Lisa Jackson announced EPA
will issue guidance soon on the use of diesel fuel in fracing.
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Texas Regulation
• No specific fracing regulation but generally
covered by oil and gas laws.
• Railroad Commission of Texas (RCT) has
primary oversight authority, not Texas
Commission on Environmental Quality (TCEQ)
• May 2009 RCT Chairman letter: “not…a single
documented contamination case associated with
hydraulic fracturing.”
• Bills have been proposed to increase fracing
regulation.
– Ex: SB 1049 to increase disclosure requirements for
fracing operations.
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Existing RCT Regulations
• Regulations to protect groundwater include:
– 16 Texas Administrative Code (TAC) § 3.5 permit
required for drilling and deepening of wells but does
not specifically cover fracing operations.
– 16 TAC § 3.8 covers water protection and regulates
storage and disposal of oil and gas wastes.
– 16 TAC § 3.13 establishes casing, cementing, drilling,
and completion of well requirements.
– 16 TAC § 3.46 requires permit for fluid injection for
enhanced oil recovery but does NOT regulate fracing.
• If injecting diesel, will require permit.
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Subsurface Trespass in Texas
• In Coastal Oil v. Garza Energy Trust, the Texas Supreme
Court held that the rule of capture prevented a neighbor
from recovering damages when subsurface hydraulic
fracturing extended into the neighbor’s land.
– Court held that since the only claim of damage from trespass
was damages from drainage resulting from fracing, the claim
was precluded by rule of capture.
• Texas Supreme Court intentionally avoided question of
whether fracing extending beneath another’s land was
itself a subsurface trespass.
– Long history of case law where Texas Supreme Court has
decided not to address question.
– In 1992, Texas Supreme Court in Geo Viking, Inc. v. Tex-Lee
Operating Company said fracing constituted a trespass when it
extended onto neighboring property but withdrew the opinion 6
months later.
Sources: Coastal Oil v. Garza Energy Trust, 268 S.W.3d 1 (Tex. 2008) and Geo Viking, Inc.
v. Tex-Lee Operating Company, 839 S.W.2d 797 (Tex. 1992) (per curiam op withdrawn on reh’g).
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EPA Hydraulic Fracing Study
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•
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February 8, 2011 EPA releases Draft Hydraulic Fracturing Study
Plan
Study designed to examine “life cycle” of fracing, particularly
potential affect to drinking water resources and human exposure to
chemicals.
Study will analyze and research questions involving:
–
•
Study will include:
–
–
•
•
Water Acquisition; Chemical Mixing; Well Injection; Flowback and
Produced Water; and Wastewater Treatment and Waste Disposal
Retrospective case studies, possibly in Barnett Shale counties of Wise
and Denton Counties
Prospective cases studies, possibly in Flower Mound/Bartonville.
Study expected to be completed in 2012, with 2014 follow-up.
In 2004, EPA conducted study finding that hydraulic fracturing in
coal-bed methane wells pose little to no threat to underground
drinking water.
Sources: EPA Frac Study Plan and Evaluation of Impacts to Underground Sources of Drinking
Water by Hydraulic Fracturing of Coalbed Methane Reservoirs (EPA 816-R-04-003), 2004.
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Other Recent Studies and Reports
• April 16, 2011:
– Congressional report prepared by Waxman, Markey,
and DeGette outlining chemicals used in fracing,
including benzene, lead, and methanol.
– Alleged use of 29 chemicals that are known or
possible carcinogens.
• April 2011:
– Prepublication of report by Cornell Professors that
CO2 emissions from shale fracing are greater than
coal.
Sources: U.S. House Committee on Energy and Commerce, Chemical Used in Hydraulic Fracturing (April 2011) and
Robert Howard, et al, Methane and the Greenhouse-Gas Footprint of Natural Gas from Shale Formations (2011).
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Average Water Demands of Well
Fracing
• Barnett
– Water Use (gallons/well): 2,300,000
• Haynesville
– Water Use: 2,700,000
• Marcellus (PA)
– Water Use: 3,800,000
Source: EPA Frac Study Plan
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Prevalence of Fracing Wells
• US: 35,000 wells fractured per year.
• US: Estimated annual water use of 70 to 140
billion gallons.
– Equivalent water use of 40-80 cities with population of
50,000 or 1 to 2 cities of 2.5 million.
• Barnett Shale: Estimated annual water use of
2.6 to 5.3 billion gallons, estimated to peak at
9.5 billion gallons in 2010 or 1.7 % of all
freshwater demand in Barnett Shale area.
Sources: EPA Frac Study Plan
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All Texas Frac Jobs 2005-2009
~ 23,500 Wells
Source: TWDB Frac Study
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Existing Texas Water Use for
Fracing (2008 Data)
Source: TWDB Frac Study
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TWDB Demand & Supply
Estimates
• Total Texas Water Demand: 22 million acre
feet by 2060
• Total Texas Water Supply: 15 million acre
feet by 2060
Source: Water for Texas: Summary of the 2011 Region Water Plans, Texas Water Development
Board, January 2011.
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Source of Fracing Water
• Water typically stored on-site in 20,000-gallon
portable steel (“frac”) tanks, impoundments, or
centralized locations serving multiple sites.
– In Barnett water may be stored in impoundments
ranging from 8 million to 163 million gallons
• 163 million gallons may serve 2,000 gas wells
• Water used may come from ground or surface
water
• Effort are made to recycled flowback water
produced in fracturing process
– Estimates range from 10 to 40 percent recovery of
flowback water in first 2 weeks.
Source: EPA Frac Study Plan
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Future Texas Water Demands
• Fracing will increase from the current ~ 37,000
AF to a peak of ~ 120,000 AF by 2020-2030
– Expected Texas peak water demand by mid-2020s.
• Water use is contingent on price of gas
• Gas prices > $10/Mcf:
– All gas plays, even with marginal permeability, are
expected to be fraced
• Gas prices < $5/Mcf
– Less gas wells will likely be drilled, less water use
expected
Source: TWDB Frac Study
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Risk to Groundwater
• Little to no evidence of direct
impact to groundwater.
• Potential contamination of
groundwater if mechanical integrity
of well is compromised.
• Lowering aquifer water levels by
water consumption from fracing
may:
– Affect water quality by exposing
mineral to oxygen-rich environment;
– Increasing salination and potential
chemical contamination;
– Increase bacterial growth;
– Cause upwelling of lower quality
water from deeper within aquifers.
Sources: http://www.api.org/policy/exploration/hydraulicfracturing/ and EPA Frac Study Plan
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Depths of Formations and
Freshwater
• Barnett
– Formation Depth: 6,500-8,500 ft.
– Freshwater Depth: 1,200
• Haynesville
– Formation Depth: 10,500-13,500
– Freshwater Depth: 400
• Marcellus (PA)
– Formation Depth: 4,000-8,500
– Freshwater Depth: 850
Source: EPA Frac Study Plan
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Risks to Surface Water: Flowback
• After fracing, pressure decreases and frac fluid flows back to
the surface.
• Amount of frac fluid recovered as flowback varies from 25% to
75%.
• Flowback rate in first few days can exceed 100,000 gallons
per day
– Will drop to ~ 50 gallons per day over time
• As of 2009, none of 27 states with fracing require reporting of
flowback
• Flowback can have frac fluids and high TDS values,
concentrations of major ions (e.g. barium, bromide, calcium,
iron), radionuclides, VOC, and other natural occurring
elements.
• Depleted surface water sources may affect flow, depth,
temperature and reduce dilution of surface water sources
increase contaminations concentrations.
Source: EPA Frac Study Plan
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Handling/Disposing of Flowback
• Flowback and produced water are held in storage tanks and water
impoundment pits prior to and during treatment, recycling, and
disposal.
• Impoundments may be temporary or long-term.
• Underground injection is primary method for disposal for flowback
and produced water.
– Concerns regarding injection capacity and cost of trucking wastewater
to injection site.
• Potential for use of publicly owned treatment works (POTW) or
commercial treatment facilities if in populated areas.
– POTWs not designed to treat fracing wastewaters
• Releases, leaks, and/or spills involving storage and transportation of
flowback and produced water could contaminate shallow drinking
water aquifers and surface water bodies.
Source: EPA Frac Study Plan
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EPA’s Range Resources Emergency
Order
• December 7, 2010: EPA issues emergency order alleging
contamination of two wells.
• Order requires Range Resources, amongst other requirements, to:
– Provide drinking water within 48 hours to affected residents;
– Install explosivity meters within 48 hours;
– Identify gas flow, eliminate gas flow if possible, and remediate areas of
aquifer that have been impacted.
• Alleges methane contamination, not fracing fluid specifically
• Alleges that state and local authorities had not taken sufficient action
to address endangerment
• Emergency Order under Section 1431 of SDWA.
– No notice, no opportunity for Range Resources to comment, and no
presentation evidence.
– Failing to comply with Emergency Order could lead to $16,500 per
violation per day penalty.
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DOJ Suit & RCT Finding
• January 18, 2011: U.S. DOJ files
complaint against Range Resources for
not complying with EPA’s emergency
order.
• January 20, 2011: Range Resources
appeals order.
• March 22, 2011: Following investigation,
RCT Commissioners unanimously vote to
clear Range Resources of EPA
allegations. EPA did not testify at hearing.
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Regulatory Forecast
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Disclosure of chemical additives
Recordkeeping and reporting
Narrowing of UIC exemptions
Ban on use of certain additives
Restrictions on Disposal of Flowback
Fluids
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QUESTIONS?
Leonard H. Dougal
Jackson Walker L.L.P.
100 Congress Avenue, Suite 1100
Austin, Texas 78701
Telephone: (512) 236-2000
ldougal@jw.com
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